9 IN RE: FRANCHISE NO POACHING NO.'~ PROVISIONS 10 MENCHIE'S GROUP, INC. (MENCHIE'S GROUP, INC.)

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1 STATE OF WASHINGTON HING COUNTY SUPERIOR COURT 8 9 IN RE: FRANCHISE NO POACHING NO.'~ PROVISIONS 10 MENCHIE'S GROUP, INC. (MENCHIE'S GROUP, INC.) ASSURANCE OF 11 DISCONTINUANCE The State of Washington, by and through its attorneys, Robert W. Ferguson, Attorney 15 General, and Rahul Rao, Assistant Attorney General, files this Assurance of Discontinuance (AOD) 16 under RCW , PARTIES In January 2018, the Attorney General initiated an investigation into Menchie's 19 Group, Inc, relating to its hiring practices Menchie's Group, Inc, is a California corporation with its principal office or place 21 of business in Ventura Boulevard, Suite 200, Encino, CA. Menchie's Group, Inc. is in the 22 business of franchising Menchie's Frozen Yogurt Stores ("Menchie's Stores"), For the purposes of this AOD, Menchie's Group, Inc. includes its directors, 24 officers, managers, agents acting within the scope of their agency, and employees as well as its 25 successor and assigns, controlled subsidiaries, divisions, groups, affiliates, partnerships, and joint ventures. M EN C H 1 E' S GROUP, INC. I ATrORNEY GL'NERAL OF WASHINGTON AmA ndivision e 300 Filth Avenue, u, Suite 3000 Senitle, OVA 9S)

2 l II. I1INEST1IGATION Menchie's Group, Inc. does not have any Menchie's Store operating in 3 Washington that are operated by Menchie's Group, Inc. Currently, there are 31 Menchie's Stores 4 located in Washington which are owned and operated by franchisees. In addition, there are 14 5 Franchise Agreements for Menchie's Stores to be operated in Washington, which have been 6 signed by Menchie's Group, Inc. and franchisees where the Menchie's Stores have not opened 7 Yet For years, Menchie's Group, Inc. has included language in its franchise 9 agreements that restricted a franchisee's ability to solicit or hire workers from Menchie's Group, 10 Inc. or its affiliates ("no-poaching provision"). Specifically, the standard Menchie's Group, Inc.. I 1 franchise agreement stated the following: 12 You may not employ or seek to employ, directly or indirectly, any person who is at the time or was at any time during the prior 6 months was employed in any type of managerial position by us or our affiliates unless you compensates us for all costs and 14 expenses incurred in losing and replacing the employee up to a maximum of $25,000, plus attorneys' fees and expenses. 15 The no-poaching provision restricted franchisees from hiring employees from Menchie's Group, Inc, or its affiliate-owned stores. 2.3 The Attorney General asserts that the foregoing conduct constitutes a contract, 18 combination, or conspiracy in restraint of trade in violation of the Consumer Protection Act, 19 RCW Menchie's Group, Inc. expressly denies the conduct described above constitutes a contract, combination, or conspiracy in restraint of trade in violation of the Consumer Protection Act, RCW , or any other law, and expressly denies it has engaged in conduct that 23 constitutes a contract, combination, or conspiracy in restraint of trade. Menchie's Group, Inc. 24 enters into this AOD to avoid protracted and expensive litigation. Pursuant to RCW , 25 neither this'aod nor its terms shall be construed as an admission of law, fact, liability,. misconduct, or wrongdoing on the part of Menchie's Group, Inc. MENCHIE'S GROUP, INC. 2 AITORNEYGENERALOFWASHINGTON ri b Division 300 Fifih Avenue, Suite 2000 Scnitle, WA (206), ()422348v.3

3 I 2.5 Prior to being contacted by the Washington Attorney General's office regarding 2 the no-poaching provision, Menchie's Group, Inc. had already notified by its franchisees 3 that it will not enforce the no-poaching provision in their Franchise Agreements. Historically, 4 Menchie's Group, Inc. has never enforced the no-poaching provision and in fact, has allowed 5 one of its employee to work for a franchisee without requiring the franchisee to pay Menchie's 6 Group, Inc. any money as provided for under the no-poaching provision , 3.1 Subject to Paragraph 2.4 above, Menchie's Group, Inc. agrees: It will no longer include no-poaching provisions in any of its future 10 franchise agreements; It will not enforce no-poaching provisions in any of its existing franchise 12 agreements, and will not seek to intervene or defend in any way the legality of any no-poaching provision in any litigation in which a franchisee may claim third-party beneficiary status rights to 14 enforce an existing no-poaching provision; It will notify all of its existing franchisees of the entry of this AOD and 16 provide them a copy upon request by the franchisee; It will notify the Attorney General's Office if it learns of any effort by a 18 franchisee in Washington to enforce any existing no-poaching provision Within 90 days of entry of this AOD, Menchie's Group, Inc. will attempt to have 20 all existing franchise agreements with entities in Washington amended to remove any no- 21 poaching provisions in its existing franchise agreements. If any franchise owner is unwilling to 22 consent to the change to its franchise agreement, prior to the 90-day deadline, Menchie's Group, 23 Inc. shall provide the name and address of the resisting franchisee and the name and address of 24 the franchisee's registered agent to the Office of the Attorney General. 25 VIENCHIE'S GROUP, INC. 3 ATTORNEY GENERAL OF WASHINGTON Antitrust Division 800 FiNt Avcnue, Suite 2000 Smile, WA

4 1 3.3 As they come up for either renewal or renegotiation during the ordinary course o 2 business, Menchie's Group, Inc. will amend its existing franchise agreements on a nationwide 3 basis to remove any no-poaching provision, a, 3.4 Within 30 days of the conclusion of the time periods referenced in this section III 5 Menchie's Group, Inc, will submit a declaration to the Attorney General's Office signed under 6 penalty of perjury stating that all provisions of this agreement have been. satisfied. 7 IV. ADDITIONAL PROVISIONS This AOD is binding on, and applies to Menchie's Group, Inc, including each of 9 its respective directors, officers, managers, agents acting within the scope of their agency, and 10 employees, as well as their respective successors and assigns, controlled subsidiaries, divisions, 11 groups, affiliates, partnerships, and joint ventures, or other entities through which Menchie's 12 Group, Inc. may now or hereafter act with respect to the conduct alleged in this AOD_ 4.2 This is a voluntary agreement-and it shall not be construed as an admission of 14 law, fact, liability, misconduct, or wrongdoing on the part of Menebie'.s Group, Inc. By entering 15 into this AOD, Menchie's Group, Inc. neither agrees nor concedes that the claims, allegations 16 and/or causes of action which have or could have been asserted by the Attorney General have 17 merit and Menchie's Group, Inc. expressly denies any such claims, allegations, and/or causes of 18 action. However, proof of failure to comply with this AOD shall be prfma facie evidence of a 14 violation ofrcw , thereby placing upon the violator the burden of defending against 20 imposition by the Court of injunctions, restitution, costs and reasonable attorney's fees, and 21 appropriate civil penalties under the Consumer Protection Act Menchie's Group, Inc. will not, nor will it authorize any of its officers, employees, 23 representatives, or agents to state or otherwise contend that the State of Washington or the Attorney 24 General has approved of, or has otherwise sanctioned, the conduct described in Paragraph 22 with 25 respect to the no-poaching provision in Menchie's Group, Inc.'s franchise agreement- MC GROUP, INC. 4 ATTORNEY UENEFALOFWASIIINGTON Mt Division 800 Fifth ~ih Avcmic, e suite 2000 Seau1:, WA (206)

5 1 4.4 This AOD resolves all issues raised by the State of Washington and the Antitrust 2 Division ofthe Attorney General's Office under the Consumer Protection Act and any other related 3 statutes pertaining to the acts set forth in Paragraphs above that may have occurred before 4 the date of entry of this AOD and concludes the investigation thereof. Subject to Paragraph 4.2, the 5 State of Washington and the Antitrust Division of the Attorney General's Office shall not file suit o 6 take any further investigative or enforcement action with respect to the acts set forth above that 7 occurred before the date of entry of this AOD. 8 9 APPROVED ON this day of JUDGE/COURT COMMISSIONER MENCHIE'S GROUP, INC. 5 ATTORNEY GGNEI'.AL OF WASHINGTON Antitrust Division 300 Fifth Avenue, Suite 2000 Scuttle, WA %,.3

6 1 2 3 Presented by: ROBERT W. FERGUSON' Attorney Genera! 4 5' RABUL R Z 1CR A Nn ~ X75_ Assistant Attorney General 6 Antitrust Division Office of the Attorney General Fifth. Avenue, Suite Seattle, WA (206) rahulr@atg.wa.gov Attorneys for State of Mashington Agreed to and approved for entry by: Menchie's Group, Inc I t r.~ MA'fllyn Natlr6nson NO BarNS Lathrop Gage, UP 7701 Forsyth Blvd., Suite 500 St. Louis, MO (314) 6-25 mnathanson@lathropgage.com RYAN, SWANSON, EVEI AND, PLLC q~7 l~cvin Collette, p Third Avenue, Suite 3400 Seattle, WA (206) collette@,ryanlaw.com Attorneys for 4enchie's Group, Inc. 25 imenchie's GROUP, INC. 6 ATTORNEY GEIMERAl. OF %V,gSHINGrON Antitrust Division 300 FiRb Avenue, Suite 2000 Senttic, WA SS